Greyhound Starts Discount Airline In Canada

<I>Calgary </I>- To Ontario-based business traveler Sandra Hammett, the inauguration of service by discount carrier Greyhound Air means she can take more business trips for the same money her company would fork over to a traditional carrier.

"I can take four trips for the price of one on another airline," said Hammett, vice president of Prime Railway Services in Courtice, Ont. She based her calculation for a return ticket between Toronto and Winnipeg on her ability to purchase a deep-discount excursion fare on Greyhound, compared with a full-fare economy ticket sold by Air Canada or Canadian Airlines International, the dominant carriers on that route.

Greyhound Air began operation July 8, offering daily flights to Hamilton, Toronto and Ottawa, Ont., via its Winnipeg hub to Vancouver and Kelowna, B.C., and Calgary and Edmonton, Alberta. The low-cost airline offers twice-daily service to all cities except Edmonton and Kelowna.

A subsidiary of Canada's inter-provincial bus line, Greyhound Transportation Corp., the carrier-like its low-cost cousins south of the border-offers reduced service but charges fares substantially lower than its competitors'.

Substantial Savings

Regular full-fare economy tickets are up to 60 percent cheaper than those sold by rivals Air Canada of Montreal and Calgary-based Canadian Airlines International. A full-fare return ticket on the Toronto-Calgary route, minus taxes, is $502 on Greyhound versus $1,073 on Air Canada and Canadian. Discounted fares on that route range from $165 to $287.

An even stronger plus for business travelers is that Greyhound has eliminated the required seven-day advance booking and a Saturday night stay. However, Apex tickets are non-refundable and flight changes can be made only up to seven days before departure. As a result, Greyhound officials believe their service will appeal to many business travelers, who can decide to take a trip the next day and still get a discounted return ticket.

"The rules are absolutely different and much more flexible," said Dick Huisman, Greyhound's president and chief executive. "The chance that you can buy cheaper if you buy earlier is dead, but the fact that you can buy cheap any time is what we need to get across."

While John Munro, the airline's executive vice president, acknowledges that the business traveler is not "critical to the airline's success," he said that Greyhound in its first few months of operation has captured a healthy share of executives.

Indeed, Daniel Lavoie, a spokesman for Canada's Treasury Board, which oversees government travel, said a bulletin was distributed to employees less than a month after Greyhound's start-up, giving Ottawa's permission to use Greyhound. Because travelers would bypass the government agency of record, The Rider Travel Group, travelers were directed to pay for the Greyhound ticket with their Diners Club card.

Identifying the corporate mix by the number of full-fare tickets sold, Munro said 18 percent of tickets went to business travelers in August, higher than the 15 percent targeted. While declining to release September figures for proprietary reasons, Munro said the momentum has continued and "we're right on track."

Still, Greyhound is taking no chances, and is making valiant efforts to target the corporate market.

Just weeks after it began operation, the carrier launched Travel Rewards, a frequent flyer program allowing travelers to keep flight coupons that track the number of points accrued on a certain trip; the bonus points are redeemed through the airline's reservations system. Each point is earned for every pre-tax dollar spent and members can purchase almost anything, from a Greyhound courier express shipment for 300 points to a return air ticket anywhere the airline flies for 3,500 points. Munro said Greyhound hopes to add partners early in 1997.

As part of its marketing program, Greyhound recently launched a short-term promotion, the Ultimate Reward Ticket, entitling any traveler who purchases one round-trip or two one-way, full-fare, economy-class tickets between Oct. 18 and Dec. 31 to a free round-trip ticket for travel between Jan. 1 and May 31, 1997. Less than a week after the promotion was announced, the number of full-fare tickets sold had tripled, Munro said.

The airline also has targeted 120,000 business travelers in Toronto, Winnipeg, Hamilton, and Kelowna through a direct mail campaign, offering them an opportunity to belong to the Priority One Club. By year-end, the program will be available to all business travelers.

The main benefit of club membership, however, is to help offset the airline's acknowledged service shortfall. "Because we have a maximum of two flights per day, many travelers are saying, 'what if there's a delay or I want to change and I can't?' " said Munro.

With Priority One membership, passengers experiencing flight delays of more than two hours for reasons other than weather will be offered a ticket on an alternate carrier or a free ticket on their next flight up to the value of the existing ticket.

In addition, Priority One passengers, like all full-fare-paying passengers, are given advance boarding privileges, even before travelers who are elderly, disabled or those traveling with small children.

Passengers flying any one of Greyhound's six 170-seat Boeing 727 aircraft might consider one of six seats immediately behind the bulkhead. Normally, seat pitch is 31 inches, but the six post-bulkhead seats offer more leg room.

One negative is the required stopover in Winnipeg for travelers accustomed to flying non-stop across the country. However, the layover is no more than one hour.

Like the U.S. low-cost carriers, Greyhound has found many ways to trim costs. The operating structure itself is cost-effective because Greyhound doesn't run the airline. Instead, Kelowna Flightcraft, which purchased the six aircraft from Continental Airlines, is the operator that trains and employs flight crews, and maintains the aircraft. Greyhound handles the reservations, collects and keeps the revenues from ticket sales, and pays Kelowna an hourly air-time fee, which is constant regardless of the number of passengers on a flight.

Airport ground crews are contracted out from third-party companies. Huisman has negotiated a deal for onboard refreshments in which he pays the airline caterer, Cara Operations Ltd., cost plus a small handling fee for the complimentary onboard snacks. In return for low-cost food, flight attendants can sell, on behalf of Cara, additional snacks and eventually other items including magazines.

Circumventing The CRS

Perhaps one of the greatest savings is the airline's distribution system, which circumvents the CRSs: Greyhound merely expanded the reservations infrastructure of its bus operation.

Once a reservation is made, a passenger is given a confirmation number, and tickets are available for pickup at the airport prior to departure or at one of Greyhound's bus stations. Unlike traditional IATA tickets, Greyhound's version is actually a 3 1/4-by-5 1/2-inch bus ticket-a coupon for every leg of the journey, plus other slips outlining the itinerary, the ticket cost including taxes and the number of frequent flyer points.

While the present system keeps the travel agency out of the loop, Munro said plans are under way to develop a system so that corporate travel agencies can distribute the ticket-with no commission-if their client requires.

Other costs have been reduced further by eliminating onboard magazines and newspapers, which are frequently distributed to only business-class passengers anyway on traditional carriers.